IATA chief: No investment for Indian aviation until high costs are cut

FOREIGN airlines will not pick up stake in cash-strapped Indian carriers until steps are taken to stem the high costs of aviation operations in India, says International Air Transport Association (IATA) director general Tony Tyler.

"I don't think it [allowing foreign airlines to invest in Indian carriers] is a game changer, but it is a good thing. It will not solve the problems of Indian aviation. It certainly is a step in the right direction, but it is not the panacea that some believe it is," Mr Tyler told Press Trust of India in an interview.

"As long as high taxes prevail, high airport costs and congestion, and poorly developed air navigation [services] means more congestion, high cost of operations exist, you are not going to get a lot of people to invest in airlines," said Mr Tyler, former CEO of Hong Kong's Cathy Pacific AirwaysHe was replying to questions on Indian government's recent decision to liberalise foreign direct investment policy in aviation, allowing foreign carriers to pick up a maximum of 49 per cent equity in Indian airlines.

"Unless conditions in India are improved for the airlines, you are not going to see a flood of foreign carriers coming into the industry. Because foreign capital needs a return just as anywhere else."

The IATA chief also made it clear that merely investing fresh capital would not solve the problems of the industry. "It has to be used in a way to improve the business in some way. It can be used to grow the business. If the business is loss-making then some of it needs to be used to restructure."

On the Airport Development Fees (ADF) imposed at Delhi and Mumbai airports which is to be withdrawn from January, Mr Tyler said though the government has taken the right step in ordering withdrawal of ADF, IATA was concerned that the revenue shortfall on this count would have to be offset by raising charges for the airlines.

Mr Tyler said the high airport costs were impacting domestic air traffic too. "The Indian airport costs, let us not kid ourselves, remain a big problem. Domestic traffic has been in decline recently. High airport costs have to have something to do with it," he said.

Though this was not the only reason for a declining air traffic, "if you increase the cost of operating, it is going to reduce the amount of operations they do. They are not going to be able to put fares in the market that will keep people flying," the IATA chief said.